Supes unanimously approve suspending citywide cannabis tax to help businesses, curb illegal sales

San Francisco supervisors on Tuesday unanimously approved an ordinance to suspend The City’s Cannabis Business Tax through the end of...

San Francisco supervisors on Tuesday unanimously approved an ordinance to suspend The City’s Cannabis Business Tax through the end of next year, in an attempt to curb illegal marijuana sales.

According to Supervisor Rafael Mandelman, the legislation’s author, suspending the business tax through Dec. 31, 2022, would help support legal cannabis retailers as they struggle to compete with illegally sold cannabis.

San Francisco voters approved the tax in Nov. 2018, which imposes a 1% to 5% citywide tax on gross receipts from cannabis businesses. The tax is set to go into effect on Jan. 1, 2022.

“Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers,” Mandelman said in a statement. “Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products. Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators.”

Mandelman’s office pointed to a Dec. 19 report from the California Legislative Analyst’s Office that found that increased state cannabis tax rates were directly linked to illegal cannabis sales.

In addition to the illegal sales, increased theft is also creating problems for cannabis retailers.

In a recent case, on Nov. 16, an armed group stole thousands of dollars’ worth of merchandise from cannabis retailer BASA, located on Grove Street. The burglary was the fifth at the location, according to Mandelman’s office.

“Cannabis businesses, along with many other retailers in San Francisco, are struggling under the weight of out-of-control retail theft,” Mandelman said. “San Francisco needs to do more to protect these businesses, their employees, and their customers before we hit them with a new tax.”

Once the legislation goes into effect, Mandelman said his office will next work with the City Controller’s Office, the Treasurer and Tax Collector’s Office, and the Office of Cannabis, among other stakeholders, to analyze data on cannabis business sales in The City. The goal would be to present a set of recommendations on tax rate and structure for cannabis retailers to the Board of Supervisors and implement a new plan for 2023.

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